Fiscal Year 2022 Budget Briefing Bureau of Administration ...
Post Budget Briefing Institute for Fiscal Studies 23 rd March 2006 .
23
Post Budget Briefing Institute for Fiscal Studies 23 rd March 2006 p://www.ifs.org.uk/budgets/budget2006/index.
-
Upload
mason-ruiz -
Category
Documents
-
view
212 -
download
0
Transcript of Post Budget Briefing Institute for Fiscal Studies 23 rd March 2006 .
Post Budget Briefing
Institute for Fiscal Studies
23rd March 2006
http://www.ifs.org.uk/budgets/budget2006/index.php
Public finances
Carl Emmerson
A small Budget?
• 2006 Budget • 45 measures averaging £40m each per year
• 2002 Budget • 54 measures averaging £220m each per year
• 1997 Budget• 27 measures averaging £370m each per year
• 2005 Pre-Budget Report• 30 measures averaging £165m each per year
Source: HM Treasury
Budget measures
£million 2006–07 2007–08 2008–09
Total takeaway 515 1,260 1,205
Total giveaway 895 845 500
Net takeaway –380 415 705
Source: HM Treasury
Underlying public finances
• Economy• growth forecasts unchanged from PBR• output gap estimated to be slightly smaller
• Public finances• offsetting changes in receipts and spending• borrowing and debt broadly unchanged
Public Sector Net Borrowing
0
5
10
15
20
25
30
35
40
45
2004–05 2005–06 2006–07 2007–08 2008–09 2009–10 2010–11
Financial year
£ B
illio
n
March 2005 Budget
December 2005 Pre-Budget Report
March 2006 Budget
Source: HM Treasury
Changes to forecasts (1)
• BBC classification change• January 2006 ONS decision to count this
as central government rather than public corporation
• both receipts and spending increased by around £3bn a year
Changes to forecasts (2)
• Medium term receipts up by £2bn/year• 8% rise in stock market• slight increase in oil price
• No increase in short-term receipts• recent average earnings and employment data• oil production
• Spending up on Working and Child Tax Credits• due to lower salaries and wages
Gordon Brown’s fiscal rules
• Golden rule • only borrow to invest • receipts must cover current spending• implies surplus or balance on current budget• judged over the economic cycle, not year by
year
• Sustainable investment rule
Current budget balance
-2.8
-0.2
1.2
2.2 2.2
1.0
-1.2-1.9 -1.6
-0.9 -0.6
0.10.5 0.7 0.8
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
96–9
7
97–9
8
98–9
9
99–0
0
00–0
1
01–0
2
02–0
3
03–0
4
04–0
5
05–0
6
06–0
7
07–0
8
08–0
9
09–1
0
10–1
1
Per
cent
age
of n
atio
nal i
ncom
e
Outturns
Budget 06 forecast
Source: HM Treasury
Current cycle total =0.7% of GDP or £10.1bn
Chances of meeting the golden rule?
55%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Budget 2006
Pro
ba
bili
ty
Source: HM Treasury; IFS
50/50 chance
Chances of meeting the golden rule?
58% 55%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pre-Budget Report2005
Budget 2006
Pro
ba
bili
ty
Source: HM Treasury; IFS
50/50 chance
Chances of meeting the golden rule?
75%
58% 55%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Budget 2003 Pre-Budget Report2005
Budget 2006
Pro
ba
bili
ty
Source: HM Treasury; IFS
50/50 chance
Gordon Brown’s fiscal rules
• Golden rule
• Sustainable investment rule • keep debt at a “stable and prudent” level • defined as below 40% of national income• to be met every year in current economic
cycle
Will the investment rule be met?
0
10
20
30
40
50
60
97–9
8
98–9
9
99–0
0
00–0
1
01–0
2
02–0
3
03–0
4
04–0
5
05–0
6
06–0
7
07–0
8
08–0
9
09–1
0
10–1
1
Financial year
Per
cent
age
of n
atio
nal i
ncom
e
Budget 2006
Ceiling
Source: HM Treasury; IFS
Will the investment rule be met?
0
10
20
30
40
50
60
97–9
8
98–9
9
99–0
0
00–0
1
01–0
2
02–0
3
03–0
4
04–0
5
05–0
6
06–0
7
07–0
8
08–0
9
09–1
0
10–1
1
Financial year
Per
cent
age
of n
atio
nal i
ncom
e
Budget 2006
Ceiling
Budget 2003
Source: HM Treasury; IFS
Will the investment rule be met?
0
10
20
30
40
50
60
97–9
8
98–9
9
99–0
0
00–0
1
01–0
2
02–0
3
03–0
4
04–0
5
05–0
6
06–0
7
07–0
8
08–0
9
09–1
0
10–1
1
Financial year
Per
cent
age
of n
atio
nal i
ncom
e 80%60%40%20%Budget 200620%40%60%80%Ceiling
Source: HM Treasury; IFS
A rising tax burden
25.0
30.0
35.0
40.0
45.0
50.0
70
–7
1
75
–7
6
80
–8
1
85
–8
6
90
–9
1
95
–9
6
00
–0
1
05
–0
6
10
–1
1
Pe
rce
nta
ge
of
na
tion
al i
nco
me
Current receipts
Net taxes and social security contributions
Source: HM Treasury
Total Managed Expenditure
-2-1012345678
96–9
7
97–9
8
98–9
9
99–0
0
00–0
1
01–0
2
02–0
3
03–0
4
04–0
5
05–0
6
06–0
7
07–0
8
08–0
9
09–1
0
10–1
1
Financial year
Per
cent
age
real
incr
ease
3032343638404244464850
Per
cent
age
of n
atio
nal
inco
me
Level (RH axis)
Source: HM Treasury
Total Managed Expenditure
-2-1012345678
96–9
7
97–9
8
98–9
9
99–0
0
00–0
1
01–0
2
02–0
3
03–0
4
04–0
5
05–0
6
06–0
7
07–0
8
08–0
9
09–1
0
10–1
1
Financial year
Per
cent
age
real
incr
ease
3032343638404244464850
Per
cent
age
of n
atio
nal
inco
me
Real increase (LH axis)
Level (RH axis)
Line 2
PBR projection (% ofGDP, RHS)
Source: HM Treasury
What increases might we have?
1.9
0.0
-5.0
10.5
4.4
2.2
0.0
3.4
-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11
Education
Non education
Social security & tax credits
NHS
Official Development Assistance
Home office
Of which:
Total Managed Expenditure
Percentage real increase
HMRC, HMT, DWP & Cabinet Office
Source: HM Treasury ; IFS
What increases might we have?
1.9
0.0
-5.0
10.5
3.1
2.2
0.0
5.2
-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11
Education
Non education
Social security & tax credits
NHS
Official Development Assistance
Home office
Of which:
Total Managed Expenditure
Percentage real increase
HMRC, HMT, DWP & Cabinet Office
Source: HM Treasury ; IFS
Conclusion
• Relatively small Budget• fiscal rules still expected to be met with
reduced margin of error• Risks
• can economy grow as quickly as hoped?• will receipts materialise?• will total spending be reduced?• if so which departments will suffer?
